Lansdowne Bets on Italian and Greek Stocks as Others Flee

June 5 (Bloomberg) -- Lansdowne Partners LP, the largest
European hedge fund that invests in stocks, wagered on Greek and
Italian stocks in the first four months of the year as the
worsening sovereign-debt crisis sent many investors fleeing from
the region.

The firm used one of its funds to take long positions, or
bets that stocks will rise, in Piraeus Port Authority SA, the
operator of Greece’s biggest port, Thessaloniki Port Authority
SA, which operates the country’s second-largest harbor, and
Intesa Sanpaolo SpA, Italy’s second-biggest bank, according to a
presentation obtained by Bloomberg News. The firm raised its
outlook on Europe to “mixed” as of May 1 from bearish three
months earlier, London-based Lansdowne said in the presentation.

Lansdowne, the $11.6 billion hedge fund founded by Steven
Heinz and Paul Ruddock in 1998, is betting on riskier parts of
the European market as investors in the region have rushed to
the safest assets amid growing concern that Greece will be
forced to leave the euro area. Greece’s ASE Index has plunged 26
percent this year and Italy’s benchmark stock index, the FTSE
MIB Index, has fallen 15 percent.

Lansdowne posted a 1 percent loss this year through April
in the A Class shares of its European Hedge Fund Strategy, after
falling 13 percent last year, according to the presentation. The
strategy, which started in 1998 and is run by Heinz and David
Craigen, can bet on or against securities including stocks,
commodities and derivatives, according to the presentation,
dated May 2012. The portfolio has $2.2 billion in assets and is
79 percent invested in Europe, 21 percent in Brazil, Russia,
India and China and 7 percent in other areas.

Lansdowne Statement

“Lansdowne does not make any public comment about their
individual investments or investment decisions,” Andrew Honnor,
a spokesman for the firm, said in a statement. “Lansdowne
cannot confirm the authenticity of the material which has been
published by Bloomberg and does not condone the publication of
the information,” he said.

Hedge funds on average gained 1.7 percent this year through
April and fell 5.8 percent last year, according to the Bloomberg
Aggregate Hedge Fund Index.

Piraeus Port rose 27 percent this year through April before
falling by the same amount in May. Thessaloniki Port climbed 24
percent in the first four months of the year and sank 14 percent
in May. Last month, Greek stocks fell 25 percent as investors
speculated that the Mediterranean nation may leave the euro area
and political leaders failed to form a national-unity
government.

Intesa Sanpaolo

Intesa Sanpaolo declined 12 percent in the first four
months of this year and another 12 percent in May as investors
worried about the health of European banks following a Greek
withdrawal from the euro. Last month, Moody’s Investors Service
downgraded 26 Italian banks, including Intesa Sanpaolo.

Other long positions in Lansdowne’s European Hedge Fund
Strategy include Anheuser-Busch InBev NV, Deutsche Post AG, Coal
India Ltd. and China Resources Enterprise Ltd., the firm said in
the presentation. The fund is 39 percent net long, calculated by
subtracting the percentage of a fund’s short positions, or bets
on falling prices, from its long wagers.

Lansdowne became bullish about the U.S. market environment
in the European Hedge Fund Strategy as of May 1, compared to the
previous three months, the firm said in the presentation. The
fund also turned positive on U.S. financials as of May 1
compared to three months earlier.

Short Positions

The European Hedge Fund Strategy’s short positions are in
businesses that have accounting and governance concerns, food
retail, levered Japanese companies and Turkey, Lansdowne said.
Its hedges, or offsetting trades, include put options on
Germany’s DAX, which gain in value if the benchmark falls, a
Hungarian foreign exchange option and futures of an unnamed
Indian index. A put option is a contract that gives the owner
the right to sell an underlying asset for a fixed price at a
future date.

Lansdowne has at least two other funds that were mentioned
in the presentation, the Developed Markets Strategy, formerly
its U.K. strategy, which started in 2001 and has $8.1 billion in
assets, and the Global Financials Strategy, which began in 2004
and has $1.3 billion.